ERC Program

THE BATON ROUGE AREA ERC PROGRAM

The Baton Rouge area achieved attainment of the 2008 ozone standard (75 parts per billion) in 2014 and has remained below the standard since then. This was the third of increasingly stringent ozone standards that the area has met. In March of 2017, EPA formally recognized this achievement and redesignated the area to attainment status. Meanwhile however, in October 2015, EPA promulgated a new ozone standard of 70 ppb and, based on 2014-16 ozone readings, the Baton Rouge area was expected to be redesignated back to nonattainment for the new standard in October of 2017. But, the new Trump EPA administration has recently announced that it is extending the deadline for promulgating initial area designations by one year for the 2015 ozone NAAQS from October 2017 to October 2018. This means that the Baton Rouge area will remain in attainment for ozone for another year and provided additional time to achieve attainment for the new standard.

Aside from health implications, nonattainment status with a National Ambient Air Quality Standard can have enormous economic development consequences for an affected area.

The importance of maintaining attainment of the federal ozone standard for economic development in the Baton Rouge area cannot be overstated. Under federal Clean Air Act requirements, any new major source of emissions (new industrial developments or expansions) must undergo New Source Review (NSR). In attainment areas NSR consists of a process called Prevention of Significant Deterioration (PSD). New Source Review in nonattainment areas (NNSR) is a much more severe process. The principal requirements of NNSR are:

Installation of Lowest Achievable Emission Rate (LAERC) technology

Provision for "offsets" representing emission reductions that must be made from other sources, and

Completion of an analysis of alternate sites, sizes, production processes, and environmental control techniques and

Demonstrate that the benefits of locating the source in a nonattainment area significantly outweigh the environmental and social costs imposed

The “offset” provision of NNSR requires that, for example, a new industry locating in an ozone nonattainment area that expects to emit 100 tons per year (tpy) of a pollutant (e.g. NOx) might have to find 110 tpy of reductions from another source to offset its emissions. The offset ratio (e.g. 1:1.1) is designed to ratchet down ozone-forming emissions over time. It is this provision that presents the potential for seriously constraining industrial development in the Baton Rouge area. The stark truth is that there is precious little in the way of available offsets to support permitting for new industries or expansions at existing industries.

Only point sources are currently eligible for generation, banking and/or trading of emission reduction credits (ERCs) under current DEQ rules. After several decades of aggressively reducing emissions of NOx and VOCs to mitigate ozone levels, Baton Rouge industries have practically exhausted opportunities for voluntary emission reduction projects and ERCs. Banked ERCs have been depleted and, for all practical purposes, are unavailable for new industries or expansions that would require them to meet offset requirements for air permits. The industrial renaissance that the Baton Rouge area was beginning to enjoy has come to a grinding halt.

Historically, ERCs were typically earned by an industry through implementing projects that resulted in emission reductions at their facility. For example, an industry might close or put controls on an existing source. DEQ would have to certify the credits before allowing them to be banked or used for offsets, since the credits must meet Clean Air Act requirements that they be:

Enforceable (i.e., authorized by an appropriate permitting mechanism)

Permanent

Quantifiable

Real (i.e., must be actual, not potential emission reductions), and

Surplus (i.e., not required by a regulation)

Alternatively, an industry might buy ERCs that have been banked by another industry.

The current problem with this rather limited field of play (industrial facilities) is that the emission reduction credits bank is now practically broke with few, if any credits, available to provide needed offsets. The Baton Rouge Area Chamber (BRAC) has described several major projects in the past that were placed on hold because of sufficient offsets cannot be obtained for requisite air quality permits.

After almost 25 years of working to reduce ozone levels in the Baton Rouge area, practically all of the simple and relatively low-cost emission reduction measures have been exhausted. Recognizing these impediments to further progress in reducing ozone levels and economic development, stakeholders of Baton Rouge Clean Air Coalition, have proposed an innovative strategy for the Baton Rouge area that will (1) reduce ozone-forming emissions and help facilitate maintenance of the ozone standard, and (2) produce bankable ERCs that can be used to meet offset requirements for permitting new facilities and expansions at existing facilities.

The centerpiece of the new strategy is to revise DEQ’s banking rules to allow creditable (i.e., surplus, permanent, quantifiable, and enforceable) reductions from certain mobile sources to qualify as ERCs and therefore be used as offsets for nonattainment new source review (NNSR) purposes. Some examples of types of projects that could be conducted in the Baton Rouge area are:

Local industry funds truck stop electrification to earn NOx ERCs

Local industry funds retrofits/conversions of marine vessels operating on the Mississippi River in the Baton Rouge region for NOx/VOC/PM2.5 ERCs

Local industry pays for conversions of school buses from diesel to CNG and gets ERCs for PM2.5 emissions reductions

Retrofits/conversions of local mass transit vehicles generate marketable ERCs that can help fund services

Local industry contributes to a match for a local government grant for vehicle fleet conversions to CNG

Implementing the new strategy will help mitigate air quality improvement and economic development constraints of the current "point source only" banking system and provide a number of valuable benefits such as:

Allow for continued economic and transportation development (increased availability and lower costs for ERCs)

New ERC projects can start reducing emissions and improving air quality in a relatively short period of time

Provide for overall ratcheting down of emissions in the nonattainment area

Facilitate overall emissions reductions in pursuit of attainment and maintenance of ozone and PM2.5 NAAQS

Substantially further interest in clean diesel

DEQ has now completed the draft rule (AQ365) and a round of substantive changes that would implement the new ERC strategy. The public hearing for the rule with substantive changes (AQ365S) is scheduled for March 29, 2017. The rule is expected to become effective in the May, 2017 time frame.

To help coordinate and facilitate the new ERC program, CRPC and other BRCAC stakeholders felt it would be beneficial to develop and maintain a web-based Information Resources Center (IRC) website. Purposes of this new IRC would include: